Will your server vendor withstand the tide of virtualisation?

Virtualisation is a raging tide that looks set to make the fortune of a number of IT vendors. But it also could be the ruin of many others. What about Dell?

By
Manek Dubash, Techworld
| Apr 07, 2006

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Virtualisation is a raging tide that looks set to make the fortune of a number of IT vendors. Potential customers flock to seminars on virtualisation where they would previously have stayed in the office. And data centre managers rub their hands at the prospect of solving their space, computing power systems management and cooling issues at one fell swoop.

But the wave of virtualisation could adversely affect the futures of many vendors. How so?

One of the biggest drivers behind virtualisation is its ability, in the words of Richard Warley of the hosting company Savvis, "to arbitrage your processing cycles". In other words, you can make better use of existing servers by increasing processor utilisation through consolidation. It means running processes or applications on a single server in complete isolation from other applications. In theory, the result is that you need fewer servers, lowering your IT management overheads. And the technology that enables this is virtualisation.

This is no free ride of course. You need to be able to manage the virtual machines (VMs), and move them across hardware barriers in order to make best use of the technology -- preferably automatically. And you need to be able to ensure that the system or systems in which they're installed are running at maximum efficiency and are highly reliable -- one box could be supporting a lot more users after all.

The upshot is, though, that enterprises could end up buying many fewer discrete systems, and that could be a problem for many vendors. If your company is running its business on that vendor's products, you might care about this. Will it survive?

What about Dell, for instance? Not only is the Texas-based company responsible for some 50 per cent or so of the UK's PC sales, it's taking an increasing chunk of the country's server sales too.

Hugh Jenkins, enterprise product manager at Dell UK, said Dell is well aware of the virtualisation trend. He agrees that virtualisation could well affect Dell's hardware sales figures. "As a result of virtualisation, Gartner is predicting a big drop in server sales from 2007", he says. "We're alive to this."

As a result, Dell has subtly modified its sales message in recent times. It used to be that Dell's marketing concentrated on its route to market. 'We go direct to the customer and that's why we're cheaper', was the essential thrust of it.

No longer; Dell is in transition. Fulfilled by companies such as Unisys and Getronics  itself a big Dell reseller  Dell is positioning itself as a company that can help you integrate technologies as well as sell you hardware.

Jenkins couldn't say what proportion of the company's revenues now come from services rather than hardware sales, but it is increasing, he says. Comparing Dell to IBM, which has divested itself of the desktop client business and moved big time into services over the last ten years, and referring to the huge footprint that Dell has in the desktop PC market, Jenkins says: "We'll never be an IBM". That piece of Dell's business is not going away in a hurry.

However, Jenkins says that Dell's sales team is well aware that services are a highly profitable business. Dell hoovers up some $4 billion of services revenues annually in Europe alone. And Dell sells services along with its hardware, just like WH Smith staff try to sell you cut-price chocolate along with your copy of The Economist. "It's built into the sales guys' DNA", says Jenkins. "It's the 'do you want fries with that?' mentality".

Whether the big drop in server sales that Gartner predicts comes to pass remains to be seen. After all, as Jenkins says, not all servers will be consolidated. And there remain valid reasons for running a single application on a server, even if that application is running in a VM for flexibility and disaster recovery reasons. Server sales aren't going to suddenly drop not least because, as Jenkins says, there's still a lot of customers out there who have yet to try virtualisation.

But if virtualisation does cut server sales, it also seems likely to lead to an increase in storage area networks (SANs), according to Jenkins. "Storage virtualisation is an area we're seeing increasing interest in", he says. And guess what? Dell will happily sell you a SAN instead.

Virtualisation can lead to big savings for many companies -- though perhaps not as much as the more aggressive marketing would have you believe. 'Twas ever thus.

But for others, it could well mean that money saved through virtualisation is spent on something else instead. If you're an IT manager with an eye on the alignment between business processes and the IT infrastructure, it's something you need to be aware of.